BISHKEK, Dec 22 (By Giorgio Fiacconi-TCA publisher). The news that Russia was admitted to the World Trade Organization (WTO) did not catch sufficient headlines in Central Asia press, but after 18 years since the start of negotiations (application to GATT in 1993) and a considerable amount of squabbling over the joining of such organization, there is no doubt that this fact is remarkable and deserves appropriate consideration for economic and political reasons.
WTO is the successor of GATT and was created through various agreements between 1986 and 1994 and today is grouping some 150 countries. Headquartered in Geneva in Switzerland, the WTO mission is to regulate trade between different nations, establish rules and agreements to allow for a liberal flow of commercial transactions and develop a dispute settlement mechanism. After Kyrgyzstan, which was admitted to WTO in 1998, Russia is today the only CIS country to be invited to join the organization and this was made possible by the late decision of Georgia to not oppose any further the Russia admission. WTO acts by consensus and therefore the agreement of all member states is required for the admission of any new member. In any case it should be noted that the membership will become effective only after being ratified by the Russian Parliament (Duma). They may do this some time in the middle of 2012. Kazakhstan will probably be another country to follow up in the admission process, but so far the matter is still pending.
What the admission of Russia means for Central Asia is still not clear, given the fact that Russia has been the main promoter of the Customs Union to which Kazakhstan, Belarus and Russia have already agreed and where Kyrgyzstan and probably Tajikistan may also join in the coming year. While different economic blocs can exist and prosper, this should not contradict the rules of WTO, which demand a harmonization between the internal and external trade policies of each member country in a multilateral trade system that should be fair to everybody, with the final purpose being to improve the living standard of the population of each country in the interest of producers, exporters and consumers.
There are countries in the world that have gained an undisputed advantage from their membership to WTO, but we cannot say the same for Kyrgyzstan that, although has been the first country after the collapse of the Soviet Union to join WTO in 1998, until today has not been able to draw the obvious benefit. This is certainly due to local governance and the inability of the country to follow up certain proposed reforms, and also due to corruption.
If Kyrgyzstan can be considered one of the most liberal countries of Central Asia, the level of corruption is so high that such liberalization only favors a limited elite but does not impact the overall growth of the country and many barriers still exist before the country can perform in accordance with WTO rules and expectations.
Now the question is, “Will the entrance of Russia in WTO determine a more open economic space within the former Soviet Union and the CIS, or will the expansion of the new Customs Union just add tax barriers to the system?”
Russia’s acceptance to the WTO is certainly a landmark, and it was also welcomed by President Obama in a message to President Medvedev. The participation of Russia in the WTO is an important step to assure the United States and Europe of the predictability of trade and investment policies. Several years ago, then-President Putin attached a large importance to such participation. But how this will reflect on the action and consequences of other Central Asian countries is not yet clear since their economies are involved in a rigid autocratic and corrupted system. One issue of concern will certainly be the subsidized prices for fuel and energy that are of large concern to countries like Kyrgyzstan and Tajikistan. If Russia, under WTO rules, will adopt domestically and in the CIS countries the same prices in force in the International Market, this will certainly negatively affect the internal economy of Russia and of other CIS members.
From the other side, the clearing of the objection of Georgia to the accession of Russia was made under strong pressure from the US. It is clear that now the US, after what has happened in Pakistan, is under pressure to solve the Afghanistan supply, and US assistance in Russia’s entrance to the WTO may help develop a more conciliatory approach of Moscow over the Northern Distribution Network (NDN) that involves Russian air space and Kyrgyzstan.
It looks again as a give and take approach, but in a pragmatic policy this is understood as long as the basic principles of the WTO are respected and the end scope of providing advantages to producers and consumers, reducing corruption and improving governance through a better transparency is maintained.